No stimulus debate for India

Now that the US economic recovery seems much slower that originally predicted, there has been a lot of debate in the US on whether to increase economic stimulus or to opt for economic austerity. The democrats (and the fed) favoring the former while the republicans favoring the latter. Keynes Vs Hayek debate still rages on. (And we even have a rap anthem for this debate: "Fear the Boom and Burst" , a youtube hit). All this raging debate is likely going to stop fed or the government on taking drastic action to revive the economy.

While back in India, there is no question but to gradually cut back the stimulus. Growth is strong, inflation is worryingly high. There are good signs that RBI will continue withdrawing its monetary stimulus. The interest rates will likely be further raised to combat the inflation problem. On the fiscal front, our stimulus is much lesser (.6% of GDP in 2009) than other bigger economies like US (2.0%) or China (3.1%). Hence there is nothing much to cut back here.

In contrast to US, here in India we leave the policy matter to the experts and there is little debate on whether Keynes is right or it is Hayek. All we need is affordable food prices. Thankfully so!